The probability of the price of a particular asset moving extremely in either direction results into higher volatility risk for that particular asset. It is not arrived at from the change in level of price; but their volatility. Volatility refers to the degree of unpredictable change in the price over a period of time.
Example: Volatility of the underlying asset goes into the pricing of the Options of that underlying asset.
Forex Risk: It is the risk that a bank may suffer losses as a result of adverse exchange rate movements during a period in which it has an open position either spot or forward, or a combination of the two, in an individual foreign currency.
Market Liquidity Risk: This arises when a bank is unable to conclude a large transaction in a particular instrument near the current market price.
Credit Risk
Credit risk is more simply defined as the potential of a bank borrower or counterparty to fail to meet its obligations in accordance with the agreed terms. For most banks, loans are the largest and most obvious source of credit risk. It is the most significant risk, more so in the Indian scenario where the NPA level of the banking system is significantly high.